A blog exploring the intersection of economic thinking and urban planning/real estate development and related big-think themes.

Thursday, December 09, 2004

Glass Half Empty

In today's WSJ, Milton Friedman points out that socialists have lost the war of ideas -- but are still winning as measured by the growth of government influence in the U.S. The short article is included below.

So, it's not ideas or ideology, just politics. The insight that politics must be constrained inspired the framers of the U.S. Constitution. As too few people seem to realize, they were on to something big.

"The Battle's Half Won"
By MILTON FRIEDMAN December 9, 2004; Page A16

"In the almost six decades since the end of World War II, intellectual opinion in the United States about the desirable role of government has undergone a major shift. At the end of the war, opinion was predominantly collectivist. Socialism -- defined as government ownership and operation of the means of production -- was seen as both feasible and desirable. Those few of us who favored free markets and limited government were a beleaguered minority.

"In subsequent decades opinion moved away from collectivism and toward a belief in free markets and limited government. By 1980 opinion had moved enough to enable Ronald Reagan to win the presidency on a quasi-libertarian agenda.

"The collapse of the Soviet Union in 1989 delivered the final blow to the belief in socialism. Hardly anyone today, from the far left to the far right, regards socialism in the traditional sense of government ownership and operation of the means of production as either feasible or desirable. Those who profess socialism today mean by it a welfare state.

"Over the same period, the actual role of government in the United States also changed drastically -- but in precisely the opposite direction. In the first postwar decade, 1945 to 1955, government non-defense spending, federal, state and local, equaled 11.5% of national income, varying from a high of 16% in 1949 to a low of 8.5% in 1952. From then on, spending rose rapidly. By 1983, government non-defense spending reached 30% of national income, nearly triple the average amount in the first postwar decade. In addition, over the same period, government intrusion into business and private affairs exploded (a small sample: Medicare, Medicaid, Americorps, Head Start, Job Corps, EPA, OSHA, CPSC, LSC, EEOC). No doubt the growth of government was one reason for the shift in public opinion. Big government in practice proved less attractive than big government in prospect.

"Reagan's election brought the growth in government non-defense spending to a halt. As of 2003, government non-defense spending equaled 30% of national income, the same as it was in 1983. Government intervention through regulation and controls did fall somewhat during Reagan's presidency, but has since resumed its steady rise.

"To summarize: After World War II, opinion was socialist while practice was free market; currently, opinion is free market while practice is heavily socialist. We have largely won the battle of ideas (though no such battle is ever won permanently); we have succeeded in stalling the progress of socialism, but we have not succeeded in reversing its course. We are still far from bringing practice into conformity with opinion.
That is the overriding non-defense task for the second Bush term -- as President Bush clearly recognizes. It will not be an easy task, particularly with Iraq threatening to consume his political capital."